3 Stocks That Just Make Sense

"I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out."
-- Warren Buffett

History seems to show that good investing doesn't necessarily mean picking out complex situations and basing your investment thesis on Nobel-level math. In fact, as the current financial crisis has shown us -- not to mention the Long Term Capital Management hedge fund and many other examples -- too much complexity can often end in calamity.

In an effort to track down some of the companies that may fall into that "fish in a barrel" category, I've turned to The Motley Fool's CAPS community. Using CAPS' stock screener, I looked for companies that have a price-to-earnings ratio below 15, a long-term debt-to-equity ratio below 50%, a return on equity above 12%, and a high rating from the CAPS community.

Source: CAPS.

These are just three of the results that the CAPS screener spit out; you can run the same screen yourself to see the rest of the companies that made the cut. While the three companies above aren't meant to be formal recommendations, they are a good place to start some research. And on that note, let's take a closer look at each company.

Lying low, waiting for the turn
Whether you're Caterpillar (NYSE:CAT) selling heavy machinery or United Technologies with its Otis elevator and Carrier HVAC units, the recession-inspired construction slowdown is bad for business. But as both companies showed in their second-quarter earnings reports, a focus on efficiency and profitability can help cushion wracking sales declines.

United Technologies managed to post improving margins for most of its business units compared to last year -- an impressive effort considering every unit but one showed double-digit revenue declines. The situation is also encouraging on the balance sheet side of things. The company has the interest payments on its debt well covered -- meaning that creditors won't be breathing down management's neck -- and has more than $4 billion in cash.

This should give investors a good bit of comfort that the company will be able to march right through the downturn and prove that today's stock price is well below what the company is worth.

United Technologies has earned four stars from the CAPS community, with 1,352 members rating it "outperform," and just 48 clocking in with an "underperform" rating.

A different kind of construction
While global engineering and construction might seem like a dicey business during a recession, the bottom lines have held up fairly well for Foster Wheeler and competitors like Fluor (NYSE:FLR) and Jacobs Engineering (NYSE:JEC). The reason is that while nobody's dying to build new office buildings or residential apartments right now, these engineering companies concentrate on major infrastructure projects like oil refineries and power plants.

Foster Wheeler's second-quarter results showed a 24% drop in net income, but came in well above analysts' expectations. Looking ahead, the company said that it didn't book any new "mega" projects during the quarter, but that the current man-hours backlog is the second-highest ever for the company's larger engineering and construction group, and that the second half of the year could look pretty good, especially for its global power business.

Though Foster Wheeler's stock has already more than doubled from its lows for the year, the CAPS community is still enamored with it and has rated it a perfect five stars.

A potash plunge
Mosaic and close competitor PotashCorp (NYSE:POT) have recently run face-first into a wall from the economy. Although the price for potash has held up relatively well until a recent decline, sales volume fell drastically from last year and sapped the bottom line at both companies. Mosaic's phosphates business didn't fare any better, as even a drastic drop in prices couldn't keep volumes up.

CAPS members have remained positive on Mosaic, though, with nearly 2,500 members rating it an outperformer, versus just 100 who have given it a thumbs-down. CAPS member TexasRat recently weighed in on the bullish side:

Mosaic and others have dramatically cut back production of feed-stock and fertilizers. As economy slowly comes out of recession the farmers will have to start buying again this time with lesser supply. With 2 billion new people expected in next decade, no doubt they will require food and fertilizer.

Getting down to business
Now the CAPS community wants you. Do you think these stocks make sense? Or is the community off base in its faith? Head over to CAPS and join the 135,000 members already sharing their thoughts on thousands of stocks.

Don't stop here! Be sure to check out:

• My look at the biggest threat to a recovery.
• A debate over whether Bank of America is a buy.
• A peek at the recent success at Berkshire Hathaway.